Trai finds support from Modi government on the issue of terminating interconnect user charges

A senior government functionary said there was nothing wrong in reducing IUC, though he added that Modi administration will not interfere in the issue.Anandita Singh Mankotia | ET Bureau | August 30, 2016, 08:15 IST

NEW DELHI: The telecom regulator’s move to review interconnect user charges, which is being opposed by the country’s largest telcos, has found support in the highest levels of the government where the feeling is that these charges can be lowered.

A senior government functionary said there was nothing wrong in reducing interconnect user charges, though he added that the Modi administration will not interfere in the issue as it believes in the autonomous functioning of regulators. The official said in the past, levies such as the access deficit charge have been abolished altogether.

IUC is paid to the telecom operator on whose network a call terminates by the telco on whose network the call had originated to ensure that the former’s investment into the capital-intensive sector is adequately reimbursed. Smaller or newer operators, who have more calls being made from their networks than receiving, benefit if the IUC is lowered, while the bigger telcos lose out on revenue.

Trai is currently running a consultation process through which it is taking a relook at the interconnect charges. It has proposed that they could be abolished, a view which has triggered an uproar among top telcos such as Bharti Airtel, Vodafone India and Idea Cellular who have accused the regulator of bias against them and in favour of new entrants.

At present the termination charge is fixed at 14 paise per minute. All three major telcos – Airtel, Vodafone and Idea — have already moved courts challenging Trai’s last year’s move to reduce the IUC from 20 paise.

The senior official said the IUC was meant to finance expansion of networks but with no new operator (after Reliance Jio) expected to enter the sector, a reduction in the charge could be examined.

IP-based networks

Incumbent telcos fear that any move to lower the IUC will allow new entrants such as Reliance Jio Infocomm to erode voice tariffs, which will hurt the carriers who still get around three-fourths of the revenue from the service. They argue that bringing down the charges would be unfair as they have borne the "historical" as well as the "regulatory costs" in telecom, which newer operators don’t have to account for while pricing voice services.

Trai, when it launched the consultation process on August 5, had pointed out that telecom operators were increasingly moving from older systems to internet protocol-based (IP) networks, where there is no custom of levying termination charges.

The paper said, abolition of termination charges will encourage deployment of IP-based telecom networks. It had reasoned that even after the charges were reduced last year, revenue growth at telcos hadn’t been adversely affected.

The IUC issue has sparked off an ugly dispute not just between the country’s leading operators and the regulator but also got linked with the battle between them and Reliance Jio in the lead up to the Mukesh Ambani company’s widely anticipated but much delayed commercial launch.

Incumbent operators have accused Jio of masquerading commercial services in the guise of test services and of violating rules. Reliance Jio in turn has accused the GSM operators of sabotaging and delaying their commercial launch by not giving them adequate points of interconnection.

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